Posts Tagged ‘IRS’

New York Times: Trump got $413M from his dad, much of it from tax dodges

October 3, 2018

Newspaper report claims US president’s family avoided paying tens of millions by undervaluing properties and creating a sham corporation

Donald Trump, center, sits with hands folded at the Trump Taj Mahal in Atlantic City, New Jersey, April 6, 1990, before the start of grand opening ceremonies. Trump (C) attended the gala with his parents, Mary (3rd R) and Fred (2nd R), and sister US District Court Judge Maryanne Trump Barry (R), and brother Robert Trump (L) and his wife Blaine Trump (3rd L). Trump was dateless. (AP Photo/Charles Rex Arbogast)

Donald Trump, center, sits with hands folded at the Trump Taj Mahal in Atlantic City, New Jersey, April 6, 1990, before the start of grand opening ceremonies. Trump (C) attended the gala with his parents, Mary (3rd R) and Fred (2nd R), and sister US District Court Judge Maryanne Trump Barry (R), and brother Robert Trump (L) and his wife Blaine Trump (3rd L). Trump was dateless. (AP Photo/Charles Rex Arbogast)

NEW YORK — The New York Times reported Tuesday that US President Donald Trump received at least $413 million from his father over the decades, much of that through dubious tax dodges, including outright fraud.

The 15,000-word Times report contradicts Trump’s portrayal of himself as a self-made billionaire who started with just a $1 million loan from his father.

The Times said Trump and his father, Fred, avoided gift and inheritance taxes by setting up a sham corporation and undervaluing assets to tax authorities. The Times said its report is based on more than 100,000 pages of financial documents, including confidential tax returns from the father and his companies.

A lawyer for Trump, Charles J. Harder, told the Times that there was no “fraud or tax evasion” and that the facts cited in the report are “extremely inaccurate.”

US President Donald Trump speaks during a press conference on September 26, 2018, on the sidelines of the United Nations General Assembly (UNGA) in New York. (AFP/Nicholas Kamm)

The White House dismissed the report as a “misleading attack against the Trump family by the failing New York Times.” It criticized the newspaper and other media outlets, saying their low credibility with the public is “because they are consumed with attacking the president and his family 24/7 instead of reporting the news.”

The New York state tax department told The Associated Press that it is reviewing the allegations in the Times and “is vigorously pursuing all appropriate avenues of investigation.” The department typically refers findings to the state attorney general’s office.

The Times said the Trump family hid millions of dollars of transfers from the father to his children through a sham company owned by the children called All County Building Supply & Maintenance. Set up in 1992 ostensibly as a purchasing agent to supply Fred Trump’s buildings with boilers, cleaning supplies and other goods, the father would pad invoices with markups of 20 percent or even 50%, thereby avoiding gift taxes, the newspaper reports.

A portrait of US President Donald Trump’s father Fred Trump, and three un-signed Executive orders are seen in the Oval Office of the White House in Washington, February 9, 2017. (Pablo Martinez Monsivais/AP))

The Times said that before Fred Trump died in the late 1990s, he transferred ownership of most of his real estate empire to his four living children. The value of the properties in tax returns summed up to $41.4 million, vastly less than the Times said they were worth.

The same properties would be sold off over the next decade for more than 16 times that amount.

In total, the president’s father and mother transferred over $1 billion to their children, according to the Times tally. That should have produced a tax bill of at least $550 million, based on a 55% tax on gifts and inheritance at the time.

Instead, the children paid $52.2 million, or about 5%.

Tax experts cited in the report said that Trump is unlikely to face criminal prosecution in helping his parents evade taxes because the maneuvers occurred long ago and are past the statute of limitation.

The president’s brother Robert Trump said that “all appropriate gift and estate tax returns” were filed. “Our family has no other comment on these matters that happened some 20 years ago,” he said in a statement to the Times, “and would appreciate your respecting the privacy of our deceased parents, may God rest their souls.”

Republican presidential candidate Donald Trump waves during a campaign stop at the Jacksonville Equestrian Center in Jacksonville, Fla, Thursday, Nov. 3, 2016. (AP/Matt Rourke)

The Times report said documents it reviewed show that the future president was earning $200,000 a year in today’s dollars at the age of 3. By the time Trump had graduated from college, the report said, he was getting the equivalent of $1 million a year from his father.

When he was campaigning, Trump repeatedly boasted of his ability to turn a small loan from his father into his fortune. “My father gave me a very small loan in 1975,” he said, “and I built it into a company that’s worth many, many billions of dollars.”

The Associated Press

https://www.timesofisrael.com/new-york-times-trump-got-413m-from-his-dad-much-from-tax-dodges/

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New York state launches probe into Trump’s taxes after bombshell NYT report

October 3, 2018

The state on Tuesday launched an investigation into President Trump following an explosive report alleging that he and his family cooked up fraudulent financial schemes to help their parents dodge millions in taxes.

Trump pocketed at least $413 million in today’s dollars from his father Fred’s real estate business, The New York Times reported, citing a “vast trove” of confidential tax return and financial records.

“The Tax Department is reviewing the allegations in the NYT article and is vigorously pursuing all appropriate avenues of investigation,” the department said in a statement.

Late Tuesday evening, Mayor de Blasio announced he’d directed NYC’s Department of Finance to work with the state and “find out if the appropriate taxes were paid.”

The Times report said that much of that fortune came to Trump because he helped his parents evade taxes, setting up a fake corporation with his siblings to disguise millions of dollars in gifts from their mom and dad.

During his presidential campaign, Trump promoted himself as a self-made real estate mogul who started out with only a “very small” loan from his father.

The paper said its findings were based on more than 200 tax returns from Fred Trump, his companies and various Trump partnerships and trusts.

The records did not include Trump’s personal tax returns, which he has refused to release, breaking with decades of precedent.

Trump lawyer Charles Harder denied the report — and pointed the finger at other relatives and the financial “professionals” the family hired.

“President Trump had virtually no involvement whatsoever with these matters,” he told the paper.

“The affairs were handled by other Trump family members who were not experts themselves and therefore relied entirely upon the aforementioned licensed professionals to ensure full compliance with the law.”

The White House said that the financial matters had been approved by the IRS, while slamming the media for attacking the president.

“Many decades ago the IRS reviewed and signed off on these transactions,” read a statement from spokesperson Sarah Huckabee Sanders.

“The New York Times’ and other media outlets‘ credibility with the American people is at an all time low because they are consumed with attacking the president and his family.”

The paper said the report was based on interviews with Fred Trump’s former employees and advisers and more than 100,000 pages of documents describing the inner workings of his business empire.

“The investigation also draws on tens of thousands of pages of confidential records — bank statements, financial audits, accounting ledgers, cash disbursement reports, invoices and canceled checks,” the Times said.

With Reuters

https://nypost.com/2018/10/02/new-york-state-launches-probe-into-trumps-taxes-after-bombshell-report/

See the New York Times report:

Trump Insiders With Immunity Could Offer ‘Holy Grail’ of Long-Hidden Finances

August 25, 2018
  • Longtime lawyer Cohen and CFO Weisselberg aiding feds
  • Tax records, accounting questions loom over payments to women

Michael Cohen’s guilty plea is opening a door to a long-closed world — the business of Donald Trump.

Many have tried, unsuccessfully, to get a look. Trump rebuffed calls during the election to release his federal tax returns. Public advocacy groups have sought those returns and failed. Even his ex-wives, and by one account his bankers, haven’t been able to get a full view of Trump’s finances.

Michael Cohen on Aug. 21  Photographer: Mark Kauzlarich/Bloomberg

But now that Cohen has told prosecutors that Trump directed him to pay women for their silence and was repaid by the Trump family business, U.S. and New York authorities are taking a closer look.

“Because there are tax implications to all these transactions, it even opens up Trump’s tax returns to state and federal prosecutors: The Holy Grail,” said Frank Agostino, an attorney in Hackensack, New Jersey, who formerly prosecuted U.S. tax cases.

Image result for David Pecker, photos
David Pecker
Photographer: Francois Durand/Getty Images

Since Cohen spoke earlier this week, it has emerged that federal authorities have granted immunity to two key witnesses. Allen Weisselberg, the longtime chief financial officer of the Trump Organization, is cooperating, the Wall Street Journal reported. So is David Pecker, whose American Media Inc. made “catch and kill” deals that helped keep illicit affairs out of public view, as Vanity Fair first reported. Also circling are New York authorities, whose actions would be beyond the president’s power to issue federal pardons.

Tax charges never sound sexy. Trump and his team spend more time on Twitter and TV batting back other allegations thrown their way, like a Russian conspiracy and obstruction of justice. But tax law has been a fundamental tool for authorities since the days of mobster Al Capone. This week, tax crimes helped sink Cohen (five of eight counts) and Trump’s former campaign chairman, Paul Manafort (six of eight).

Tax crimes rarely stand alone, as the Cohen and Manafort cases demonstrated. But when prosecutors are working through often murky investigative strands, the concrete numbers found in tax forms are often a starting point. Anyone who has signed off on false tax forms may be eager to cut a deal to avoid penalties. A key witness in the Manafort case was his onetime deputy Rick Gates, who faced tax fraud charges of his own until prosecutors dropped them in a deal for Gates’s cooperation.

Deductible Expenses

For Trump and his business, Cohen’s admission this week suggested a potential tax problem. The longtime lawyer and fixer said payments to women (who said they’d slept with Trump) were in fact illegal donations to Trump’s presidential campaign intended to avert bad publicity.

Cohen paid $130,000 to silence porn actress Stephanie Clifford, known as Stormy Daniels. The Trump Organization later paid him $420,000 to cover the Daniels payments, Cohen’s tax liability and a bonus, according to federal prosecutors. The company accounted for it as legal expenses.

Lawyer bills, like other business expenses, are tax deductible. Campaign contributions aren’t. Authorities, whether federal or state, are certain to ask hard questions about how the business accounted for the payment, and whether it was a legitimate expense.

They are also likely to look back at any similar deals and how Trump executives may have accounted for those transactions. According to the Associated Press, Pecker’s company, American Media, kept a safe with contracts detailing payments to people whose stories about Trump and others had been purchased and squelched.

Trump probably hasn’t filed 2017 taxes yet. White House Press Secretary Sarah Huckabee Sanders said earlier this year he would do so by Oct. 15. The president’s personal return will reflect income from the web of limited liability companies that comprise the Trump Organization.

If any business expenses were mischaracterized, the companies could be deducting a cover-up “and making the U.S. public pay for their cover-up and campaign with our tax dollars,” said Agostino.

Alan Futerfas, a lawyer for the Trump organization and foundation, declined to comment on the matter.

Calls and emails to Weisselberg weren’t returned. Pecker didn’t respond to requests for comment. Neither Weisselberg nor Pecker has been accused of a crime.

Conflicting Accounts

The president and his lawyers have given conflicting accounts about the payments to Daniels and Cohen and haven’t addressed any potential tax implications. In an interview with Fox News on Thursday, Trump expressed disdain for the campaign-finance charges to which his former lawyer pleaded guilty. “What Michael pled to weren’t crimes,” he said.

Trump has famously shielded his full financial picture from his spouses, by way of prenuptial agreements, and sometimes his bankers, who have pressed for personal guarantees for loans.

Trump has previously cited an Internal Revenue Service audit to explain why he hasn’t released his tax returns, although the IRS has said he’s free to release them.

State authorities have been spurred on by the Cohen plea. Manhattan’s district attorney is assessing whether to begin an investigation into the Trump business. And the state’s attorney general is seeking a referral to dig deeper into Cohen’s tax matters and related issues.

Read More: N.Y. Is Said to Take Early Steps to Probe Cohen, Trump Firm

In a civil matter earlier this year, New York sued Trump and three of his children for engaging in a long pattern of “illegal activity” by using the charitable Trump Foundation to pay business, personal and campaign expenses. Trump signed off on those returns. That issue was referred by the state’s Attorney General to the IRS for investigation, as well as the Federal Election Commission. Its status is unclear.

The foundation has rejected the allegations, accusing New York enforcers of a political campaign to smear the president and his children.

Tax experts say the foundation complaint is unlikely to generate criminal charges. They consider fines and civil sanctions a more likely outcome.

Read more: Trump Used Charity as His Checkbook, N.Y. Says as It Flags IRS

“It seems like a very strong case and a very serious case,” said Jeremy Temkin, a former federal prosecutor who now handles white-collar defense cases at Morvillo Abramowitz law firm. “It has already impacted the foundation and could impact those close to the foundation.”

The president was directly involved in decision-making at the foundation, according to documents and testimony released by the New York Attorney General’s office in June. The New York report included testimony from Weisselberg and another official who said Trump personally reviewed every check from the foundation.

Weisselberg’s immunity deal is a clear threat to Trump because of the executive’s extensive knowledge of the inner workings of Trump’s company, said Harry Sandick, a former federal prosecutor in Manhattan who’s now a white-collar criminal defense attorney.

Weisselberg “knows a lot of detail about how the Trump Organization worked, not just with respect to the campaign, but in all regards and for many years,” Sandick said. “If he has immunity, he can be compelled to speak about Trump, his family and his associates.”

https://www.bloomberg.com/news/articles/2018-08-24/trump-insiders-could-offer-holy-grail-of-long-hidden-finances

Beware Fintech Firms Bearing Bitcoin –“Get rich quick” of our age?

March 5, 2018

Bloomberg

By Lionel Laurent

Banking isn’t addictive, but getting rich certainly is.
 Updated on 
Photographer: Chris Ratcliffe/Bloomberg

Fintech startups have long had trouble turning feel-good rhetoric into profitable growth. Competition is intense, consumers tend to want things for free, and dinosaur banks are far from extinct. To make matters worse, finance just isn’t as addictive as messaging or catching up with friends. That counts in an era where billions are made through monetizing attention.

Red Rag To A Bitcoin Bull

Bitcoin’s recent drop has done nothing to dissuade those dreaming of 1,000% returns

Source: Bloomberg

Back in 2016, the cryptocurrency was on nobody’s strategy white-board, but it turns out all that was needed was a 15-fold price increase in as many months. Rather than try and undercut banks, or chase millennial savers’ pennies at a loss, fintech firms are now leaping at the chance to make serious cash through a technology that most banks won’t even touch. What’s more, Bitcoin has the power to take over people’s lives. One trader says it’s worse than gambling; Korea calls victims “zombies.”

Here’s a roll call of recent converts: Mobile-payments firm Square Inc. has rolled out Bitcoin trading; social-payments app Circle splashed $400 million on Poloniex, only about 15 months after it had stopped offering bitcoin trading; and money-transfer company Revolut has started offering crypto trading facilities.

Hip To Be Square

Mobile payments firm Square has enjoyed a good run, and now thinks Bitcoin trading will help extend it

Source: Bloomberg

Given that Bitcoin wasn’t always a part of the core value proposition of these businesses, it seems more than a little unsettling to see their slick marketing machines kick into gear. At Square, Jack Dorsey’s team offers a fairytale picture-book, “My First Bitcoin,” which buries all the health warnings right at the bottom. Revolut compares cryptocurrency exchanges to local farms trading “juicy” produce at the town market.

Still, if this is what customers and investors want, where’s the harm? Trading platform Coinbase booked more than $1 billion in revenue last year, according to Recode, which, if true, is more than peer-to-peer marketplace Lending Club and more than Square. On top of the money to be made from trading fees and asset-price gains, Bitcoin could also act as a lure, helping startups cross-sell their other products to a bigger audience.

The problem is that we don’t know how long this boom will go on for. Startups may end up acquiring assets that fail to create long-term value, or that destroy it. We have seen chip-makers miscalculate their ability to profit from cryptocurrency mining in the past.

There could also be reputational risks too. We don’t know how the impact of potentially widespread investor losses would affect brands that rely on fuzzy, consumer-friendly values. Banks are used to paying out billions in compensation to victims of product mis-selling. Would smaller startups survive the same treatment?

And regulators, long the scourge of the risk-hungry entrepreneur, are beginning to crack down on the sector, with Bank of England Governor Mark Carney last week calling for an end to the cryptocurrency “anarchy.” The SEC is subpoenaing Bitcoin exchanges; the IRS is collecting user information; the G20 is eyeing a global regulatory approach. If Bitcoin really does lead to “greater financial access for all,” as Dorsey puts it, it won’t be without a fight from the authorities.

Many startups will feel like they don’t have a choice but to ride the wave. Others will assume they can manage the risk. If they miscalculate, those old bank dinosaurs will have another day in the sun — and less competitive pressure to boot.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net

https://www.bloomberg.com/gadfly/articles/2018-03-05/beware-fintech-startups-trying-to-get-you-on-to-bitcoin

NYPD officers raid Newsweek headquarters

January 18, 2018

About two dozen NYPD offficers and investigators from the Manhattan district attorney’s office raided the offices of Newsweek and its parent company, IBT Media, on Thursday.

IBT Media was co-founded by Jonathan Davis and Etienne Uzac. The IRS placed a $1.2 million federal tax lien against Uzac in December 2017.

The agents were said to be photographing servers in the offices, but not downloading any files at the offices on 7 Hanover Square, according to sources.

They appeared to be photographing the serial numbers on the machines, said a source.

In the past, IBT has been linked to a Christian church founded by Korean American evangelist David Jang and Olivet University, a university in California that Jang’s followers founded.

NYPD and the IRS had not responded to a call by press time. The Manhattan DA declined to comment.

https://nypost.com/2018/01/18/nypd-officers-raid-newsweek-headquarters/

What Elites Still Don’t Understand About Populism

November 30, 2017

Commentary

According to prominent members of the progressive elite — and a few members of the conservative elite — the election of Donald Trump signaled the rise in the United States of fascism or racism or both. These sweeping smears of Trump and his supporters, which began during the primaries, backfired in 2016: They helped fuel the discontent among ordinary voters that provided the real-estate mogul’s slender margin of victory in key Rust Belt states. The elites’ intemperate condemnation of the people’s judgment bolstered the people’s dim view of the elites.

The elites’ fear, both before and after the election, that Trump was leading a fascist takeover of America has been fueled by his shoot-from-the-hip tweets and off-the-cuff public pronouncements, many of which evinced an ignorance of the rule of law and an enthusiasm for strong rulers. But hyperbole and bombast do not a fascist takeover make. Moreover, elites would be well advised to recall — or learn — that America’s sturdy constitutional constraints, starting with the separation of powers, anticipate the ascendancy of unenlightened statesmen and are designed to keep dark impulses in check. In addition, fascism rests on the acquiescence to a powerful leader of the military, business community, media, entertainment industry, and academy. Trump cannot even unify his own party around his leadership.

The accusation that Trump’s victory represented the recrudescence of a deep-seated American racism was equally scurrilous and equally implausible. Racists still exist in America and some felt emboldened by Trump to purvey their hatred. But there is no reason to suppose that if a white, male, progressive Democrat had governed in the manner of Trump’s predecessor that popular frustration would have been less robust. President Obama rammed through Congress a fundamental transformation of health care in defiance of popular will. He usurped Congress’s lawmaking powers by issuing executive orders that appropriated funds to sustain the Affordable Care Act, that imposed extensive environmental regulations, and that altered the legal status of illegal aliens. He presided over an Internal Revenue Service that methodically impeded his political opponents’ participation in the democratic process. He downplayed or dismissed voters’ anxieties about jobs, trade, and immigration while adopting measures that exacerbated them. Abroad, he coddled adversaries and alienated allies. The notion that ordinary Americans are inveterate racists because they rejected the third term for Obama governance that Hillary Clinton represented exhibits the elites’ own bigotry.

A considerably more illuminating explanation of Trump’s victory comes from understanding the power of populism. The 2016 election returns reflected a revolt of the less well-off and less influential against political elites whom they regard as arrogant and self-serving.

Populism is inherently ambiguous. It is usually wielded as a term of reproach evoking charismatic demagogues who erode liberty and democracy by pandering to the people’s base instincts and fomenting intolerance and mob violence. But liberal democracy is, by definition, popular government, resting on the consent of the governed. If elites disrespect the people, neglect the public interest, and betray founding principles, the people are not only permitted to throw the bums out but are obliged to do so.

In “Vox Populi: The Perils and Promises of Populism,” editor Roger Kimball and an all-star lineup of conservative intellectuals place the resurgence of populism in America in broader historical and intellectual context. The essays collected in the volume began as articles commissioned by Kimball in one of his several day jobs — editor and publisher of The New Criterion. Also a PJ Media columnist, art critic for National Review, and president and publisher of Encounter Books, Kimball stringently explains in the book’s introduction that the authors are united by the anxiety that “under the cloak of democratic institutions,” the “essentially undemocratic activities” of today’s administrative state advance “an expansionist agenda that threatens liberty in the most comprehensive way, by circumventing the law.” The “common aim” of their contributions is to determine the relation between the populism roiling our politics and the preservation of national sovereignty, liberty, and democratic self-government.

In a concise survey of post-World War II American conservatism that leads off the collection, historian George Nash shows that the haughtiness and incompetence of elites have been a persistent theme of right-leaning intellectuals. Meanwhile, popular resentment of elites has been building for decades, as evidenced in the emergence of the religious right in the late 1970s, the mid-’90s Newt Gingrich revolution, the Tea Party movement in 2009, and today’s Trump insurgency.

Classicist Barry Strauss elicits sober advice for contemporary populists and elites from an examination of Roman precursors to contemporary populism. “Shrewd populists will want to adjust the regime, not destroy it,” he writes. “Wise elites, for their part, will take populist movements as a wake-up call. Instead of merely denouncing populism as false consciousness, bigotry, resentment, bad manners, mental illness, peevishness, superstition, or class warfare, and instead of adopting a ‘Problems? What problems?’ attitude when faced with protests, they will inquire as to whether genuine grievances might underlie populism’s appeal.”

According to journalist and former member of the European Parliament for South East England Daniel Hannan, Brexit was an example of a populist impulse deriving from a genuine grievance. The vote to leave the European Union, Hannan approvingly argues, was populist in that it reflected “frustration with the establishment” but classically liberal in standing for a more global and free-trading Britain, and more democratic in returning to the British people greater control over their political destiny.

Several contributors focus on ideas and intellectual influences. Writer Fred Siegel traces the left-wing contempt for regular people — which stirs up the very populist energies that it deplores — to the impact on American intellectuals of German philosophical sources, especially the Frankfurt School. James Piereson, president of the William E. Simon Foundation, reconstructs the founding political thinking that fortified the Constitution against the perennial form of populism embodied in tyranny of the majority. And philosopher Roger Scruton shows that “the real question raised by the upheavals of 2016” concerns the ability of Western liberal democracies to arrest the decay of that “pre-political loyalty,” crucial to well-functioning democracies, that enables political partisans to treat electoral opponents as fellow citizens.

Lawyer and columnist Andrew McCarthy and scholar and columnist Victor Davis Hanson, my colleague at the Hoover Institution, provide masterful overviews of the 2016 campaign. McCarthy highlights the potency of the progressive populism that opposed Trump and remains a significant political force within the country while Hanson explores the complex mindset of the politically estranged working-class and middle-class voters, many of whom cast ballots for Obama in 2008 and 2012, but who in 2016 swung to Trump.

Conrad Black — a publisher, businessman, and Franklin Roosevelt biographer — sets forth a brief history of populism in America. He boldly contends that notwithstanding a penchant for demagoguery, Donald Trump’s truth-telling about elites’ smugness, folly, and ineptitude brought about “the supreme triumph of populism in American history and in the modern democratic world.” This populist triumph, in Black’s estimation, has opened “the only avenue to national renovation.” 

Agreeing with Black about our grim situation and unexpected opportunity, Roger Kimball, in a concluding essay, underscores that national renovation is bound up with the restoration of limited government that energetically safeguards the people’s liberty, promotes their interests, and advances their prosperity and security.

Such a government cannot function properly with an elite that patronizes the people. And it cannot flourish without an elite that earns the people’s respect through a disposition, in the words of James Madison in Federalist 10, “to enlarge and refine the public views.”

Peter Berkowitz is the Tad and Dianne Taube senior fellow at the Hoover Institution, Stanford University. His writings are posted at PeterBerkowitz.com and he can be followed on Twitter @BerkowitzPeter.

https://www.realclearpolitics.com/articles/2017/11/27/what_elites_still_dont_understand_about_populism_135619.html

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See also:
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If We Love Democracy, Why Does ‘Populism’ Get Such a Bad Rap?

 https://www.wsj.com/articles/if-we-love-democracy-why-does-populism-get-such-a-bad-rap-1511997174

20% Tax On Payments To Offshore — Multinationals Scurry to Defuse House Tax Bill’s ‘Atomic Bomb’ — “It’s a very big gorilla in the living room.”

November 7, 2017

Bloomberg

ByLynnley Browning

  • Tax writer offers changes amid range of industry complaints
  • Bill aims at offshore profit-shifters, hits many others too
Bloomberg’s Sahil Kapur takes a look at the make-or-break week ahead for tax reform.

Multinational companies including Apple Inc.Pfizer Inc. and Ford Motor Co. would face a new tax on payments they make to offshore affiliates under the House Republicans’ tax bill — a surprise provision that has stunned tax experts.

The new 20 percent tax is “the atomic bomb in the draft” legislation, said Ray Beeman, co-leader of Ernst & Young’s Washington Council advisory services group. “We’re trying to get our arms around the implications.”

So far, many big U.S. companies have kept quiet on the proposal. But already, House Ways and Means Chairman Kevin Brady has tweaked the provision to lessen its impact, part of a package of changes the tax-writing panel adopted Monday night. The committee will continue debating the bill Tuesday.

 Image result for Kevin Brady, ways and means, photos
House Ways and Means Chairman Kevin Brady

House tax writers say the proposed excise tax is aimed at preventing U.S. companies from shifting their earnings offshore to subsidiaries in tax shelters — and it moved into the spotlight this week amid a series of global investigative reports on corporate tax avoidance. But tax practitioners say the provision has far larger implications for consumer prices on a range of goods.

“It’s a very big gorilla in the living room,” said Gary Friedman, a tax partner at Debevoise & Plimpton. Tech companies, pharmaceutical makers, automakers and reinsurers are the companies most likely to be concerned, he said.

Read more: Your Guide to Following the U.S. Tax-Cut Debate

A Pfizer spokeswoman said it was premature to comment, and an Apple spokesman declined to comment. Ford did not respond to requests for comments.

The tax would apply to billions of dollars in intellectual-property royalties that technology and pharmaceutical firms make to their overseas affiliates each year — payments often linked to tax-avoidance strategies. But it would also hit U.S. companies’ imports of generic drugs, cars and other products from their affiliates. Global insurers would incur the levy on the cost of “reinsurance” they buy from foreign affiliates.

‘Trade War’ Concern

The provision, which is estimated to raise $154 billion over a decade, “could trigger a trade war,” Friedman said — stirring other countries to tax their companies’ imports from U.S. units.

For investors, the impact would appear as higher overall expenses in corporate financial statements across a range of industries — potentially depressing earnings, said Robert Willens, an independent tax and accounting expert.

For consumers, the result might be higher prices for imported goods and insurance premiums — a message that various lobbying groups have been eager to share with House tax writers.

“We expected significant feedback there, and it’s exactly what we got,” Brady told reporters Monday. He added: “Insurance is an industry where I think there are some unintended consequences from the first draft. I am re-examining those provisions to make sure we got it right.”

The Coalition for Competitive Insurance Rates, a lobbying group that includes the U.S. arms of Zurich Re, Allianz Re and Swiss Re, came out swinging after the bill appeared.

Insurers’ Complaints

In the wake of recent hurricanes that ravaged Puerto Rico, Texas and Florida, “it is unfathomable” that the bill proposes “a measure that will shrink competition in the insurance marketplace and increase the cost of insurance for consumers,” it said in a Nov. 2 statement. Large global insurers, not smaller U.S.-only ones that wouldn’t face the tax, typically insure against most major disasters.

House tax writers envisioned the 20 percent tax as a way to shore up the U.S. corporate tax base, which has been eroded for years by companies sending their earnings overseas. As part of a tax overhaul that would cut the U.S. corporate tax rate to 20 percent — down from 35 percent — the House bill would also remake the U.S. approach to international business taxation.

Unlike most other developed economies, the U.S. taxes companies on their global earnings, but it allows them to defer paying taxes on overseas earnings until they’re returned to the U.S. As a result, companies have stockpiled an estimated $3.1 trillion offshore, beyond the reach of U.S. corporate taxes.

The House bill would end that practice, apply a cut-rate tax to the stockpiled earnings and use the new excise tax to try to keep more U.S. income at home in the first place.

‘Border-Adjusted’ Redux

The excise tax would apply to many payments that U.S. based companies make to foreign affiliates — be they subsidiaries, sister companies or parent companies. That would include royalties, but also payments for inventory later sold to consumers — essentially, any payment to a foreign affiliate on which the U.S. company could take a tax deduction immediately or over time.

The tax wouldn’t apply to payments between two U.S. affiliates of the same U.S. company. And it wouldn’t apply to interest payments — another method companies use to send profit overseas that would be curbed under a separate bill proposal.

Because the tax would apply to payments for inventory, some have compared it to the controversial “border-adjusted tax,” or BAT, that House Speaker Paul Ryan proposed last year. That proposal would have placed a 20 percent tax on companies’ domestic sales and imports, while exempting their exports. Ryan gave up on the idea after retailers and others argued that it would raise consumer prices.

“Our concern is that the tax ends up getting passed on to consumers and winds up being a consumption tax, similar to the border-adjustment tax,” said Levi Russell, a spokesman for Americans for Prosperity, a group backed by billionaire industrialists Charles and David Koch that also opposed the BAT.

International Automakers

Here for America, a lobbying coalition of international automakers including Honda, Toyota and Volvo, all with manufacturing, R&D and sales operations throughout the U.S., said in a Nov. 5 statement that the tax was “discriminatory” against global companies. The current tax bill, it said, “is flawed and disadvantages companies that are a backbone of American manufacturing and job creation.”

The bill does contain an escape hatch, of sorts — a way for companies to cut the amounts they’d pay under the excise tax.

Companies can either pay the 20 percent excise tax on the payments they make to an overseas affiliate — or they can make the affiliate itself subject to a tax on its net profit.

Choosing the second option might be more beneficial for most companies, tax experts said, because most U.S. companies pay their foreign affiliates a premium — a price that includes profit.

Consider a case in which the U.S. company pays its foreign affiliate $100 for a particular good. If it chooses to pay the excise tax on the payment, that’s a tax bill of $20.

But let’s say it costs the affiliate $60 to produce the good in question. Its profit would be $40, and its tax would be just $8. The company could cut its potential tax bill in half — but there’d be a different kind of price to pay: It would have to disclose more to investors — and therefore, perhaps, to competitors — about its profits on particular product lines.

Currently, companies tend to make such disclosures on broad segments of the products they offer, not particular lines. “This bill allows the IRS to define what a product line is,” said Seth Green, a principal in KPMG’s Washington National Tax practice.

Choosing the extra disclosure and the lower tax bill is the better option, said Michael Mundaca, co-director of Ernst & Young’s National Tax practice — even if it does subject foreign affiliates to more scrutiny from the IRS.

“Neither choice is good,” he said, “but the second one is better, even with increased reporting.”

— With assistance by Colleen Murphy

https://www.bloomberg.com/news/articles/2017-11-07/multinationals-scurry-to-defuse-house-tax-bill-s-atomic-bomb

American Government: What is the “deep state”?

March 10, 2017

The Economist

And where does it come from?

THE Trump era is reshaping not just American politics but also its lexicon. Terms such as “fake news”, “alt-right” and “post-truth” have entered mainstream use, and kicked up debates about what they actually mean in the process. “Deep state” is the latest to gain attention, as leaks from inside the administration frustrate Donald Trump’s supporters. Right-wing websites such as Breitbart News warn of a “deep state” that wants to “terminate” Mr Trump. Some extreme sites talk of a “war” between the deep state and the president. “If it comes to it, prefer the deep state to the Trump state,” Bill Kristol, a conservative critic of Mr Trump, recently tweeted. But what does the term actually refer to?

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American pundits have often used “deep state” interchangeably with the bureaucracies of the military and spy agencies, especially those bits that leak against the government. Mr Trump’s relations with his spies have been tense since the intelligence community determined that Russia had tried to influence the election in his favour. He has publicly challenged their assessments of his team’s ties with Russia, chastised them for past intelligence failures and compared leaks against him to practices in Nazi Germany. His supporters cite “deep-state” leaks embarrassing to Mr Trump’s administration as evidence of a shadowy network of unelected government officials undermining the president. (The president has not publicly used the term.)

But the deep state started life as something else entirely. Citizens in Turkey, where the term originated, have long worried about the derin devlet (“deep state”), which refers to a network of individuals in different branches of government, with links to retired generals and organised crime, that existed without the knowledge of high-ranking military officers and politicians. Its goal was purportedly to preserve secularism and destroy communism by any means necessary, outside the regular chain of command. Starting in the 1950s Turkey’s deep state sponsored killings, engineered riots, colluded with drug traffickers, staged “false flag” attacks and organised massacres of trade unionists. Thousands died in the chaos it fomented.

In its present avatar, “deep state” seems set to go the way of “fake news” in American discourse, a once-useful term rendered meaningless by promiscuous repetition, often in reference to quite different things. Turkey is a pioneer here too. After a handful of city councils in Germany recently cancelled rallies in support for Mr Erdogan, Turkey’s foreign minister offered a simple explanation: “This is a systematic move of the German deep state.”

http://www.economist.com/blogs/economist-explains/2017/03/economist-explains-6

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How Trump can use Obamacare to kill Obamacare

January 22, 2017

Politico

The same executive authority the Obama administration used to implement the law may now be used to dismantle it.

01/22/17 07:08 AM EST

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President Donald Trump’s order doesn’t confer any new powers on the executive branch. | AP Photo

Conservatives who railed against Barack Obama’s vast powers to build up the Affordable Care Act declared vindication Saturday with President Donald Trump’s executive order to tear it apart.

“For me, it’s a mix of irony and schadenfreude,” says Josh Blackman, a law professor who’s written two books that criticized the Obama administration’s implementation of the law. “I’ve warned for years that, with a new president in the White House, the exact same powers could be used for different purposes. That’s what we’re seeing now, to a T.”

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Trump’s order, which encourages Health and Human Services, the IRS and other agencies to work toward dismantling the ACA, doesn’t confer any new powers on the executive branch. But Trump explicitly instructs his agencies to use their existing powers to weaken the law “to the maximum extent permitted by law,” regardless of Congressional action to repeal it.

That could be devastating to Obamacare because the administration relied on its executive authority to set up the law.

“Its implementation depended critically — and depends critically — on rules and guidance that HHS and other agencies have put out,” says Nicholas Bagley, a University of Michigan law professor who supports the ACA. “There are literally thousands of decisions that had to be made” by the administration — and “any decision that the Obama administration had the discretion to make, in principle, the Trump administration can revisit.”

A big complex law always requires a lot of the details to be filled in through regulation, but that was particularly true of Obamacare. The version that squeaked through the Senate in December 2009 wasn’t meant to be final; the bill’s authors’ expected to work with the House to smooth language out for a final version.

But when Republican Scott Brown won the Massachusetts Senate seat long held by Teddy Kennedy, the Senate Democrats lost their supermajority – and their chance to work out the kinks. That left a lot more for HHS and other federal agencies to fill in – which is coming back to bite defenders of the law now.

Many of the law’s most controversial elements, like which Americans would be exempt from the mandate requiring most Americans to purchase insurance coverage, were administration decisions. Obama’s HHS secretary was also empowered to flesh out the important details about the benefits that Obamacare insurance plans were required to cover, from mental health to maternity care. Even Healthcare.gov — the much-maligned website that turned into the linchpin of Obamacare enrollment efforts — was built out through executive authority.

The vast, and at times, legally questionable decisions undertaken by the Obama administration may also set precedent for the Trump administration to do the exact same thing. Both Blackman and Bagley agree the administration’s 2013 decision to delay Obamacare’s employer mandate was unlawful; House Republicans even sued, although their challenge was thrown out in court. Trump could now cite that delay as precedent for declining to enforce provisions that he dislikes.

The Trump administration could also issue a slew of waivers to exempt Americans from the ACA’s individual mandate – although the Obama administration already broadened those exemptions in 2013, after the political outcry from Americans whose plans were canceled because they didn’t meet Obamacare criteria.

The “‘like it, keep it’ fiasco” set a precedent for Trump too, says Bagley.

At the time, the administration said it would give hardship waivers to Americans who had difficulties paying for coverage under the ACA. But “if you define the hardship as that, then every American is facing higher premiums because of the ACA, one way or another,” says Blackman. “Obamacare is itself the hardship.”

House Republicans also sued and won an initial ruling over the Obama administration’s payments to subsidize health care costs such as co-pays and deductibles for Obamacare enrollees under a certain income level. A federal court agreed the funds were illegally appropriated; the Obama administration appealed that decision. But Trump could discontinue the appeal, and hold that over Democrats in negotiations to replace the law: If he chooses to discontinue those payments, health insurers — which would be on the hook for those payments even if the government funding dried up — would probably flee the markets or jack up prices next year. Millions of ACA customers would likely see their premiums spike and their plans become unaffordable.

“If Trump were to stop the cost-sharing payments, he could send the individual insurance markets into an immediate tailspin,” says Bagley. “It would be an extraordinary hit.”

The Trump administration could also act quickly and issue less-dramatic guidance that maintains pieces of Obamacare but allows tweaks to make them more conservative.

The executive order issued by Trump just hours after his inauguration calls for giving states more power to shape health programs, and several Republican-led states have wanted to expand Medicaid but only if they could impose new restrictions, like requiring able-bodied beneficiaries to show that they were working or seeking employment, or to pay small premiums. The Obama administration had opposed these provisions, warning they would shift new costs onto the low-income Americans the program was meant to help.

Read the rest:

http://www.politico.com/story/2017/01/trump-obamacare-233983

American Voters Rejected Obama, His Legacy, Hillary Clinton, Corrupt Government, “The Narrative” and Liberal Media

November 13, 2016

Peace and Freedom Commentary

There is no American intelligentsia. And there are no deplorable Americans.

America is a nation of rule of law, democracy, and fairness to all under the law.

There is no privileged class and there are no “second class citizens.”

Everyone is subject to the law: immigrants and presidential candidates alike.

Presidential politics is about everyone. It is not about just women. It is not about just gays. It is about a great country that is good for all Americans.

The big media has always been a part of safeguarding America from corruption and liars and wrongdoing in public office.

How come The New York Times and The Washington Post decided to constantly side with the Obama-Hillary Team? How come Wikileaks was the one to show America what John Podesta and the other Hillary staffers where doing and saying?

Even after Hillary Clinton provided foreign intelligence services (illegally) a treasure trove of unencrypted classified information, the Clinton campaign han no cyber-security for the emails of Podesta and the others? Really? This is not the fault of Julian Assange. This is the trouble with imbecile Democrats. And we are supposed to trust them to run the nation?

After being preached at for years about “tolerance” by people like Barack Obama and Hillary Clinton, the hypocrisy of it all became too much to bear. The voters just could not choke down one more morsel without gagging.

It started with the lies: You can keep your doctor. Benghazi was about a video. Stick to “The Narrative.” Constantly preaching hope — but never delivering.

Anyone in the blighted inner city of Philadelphia, Baltimore, Washington DC and other American cities can tell us — not having a vibrant economy that produces jobs, income and wealth is a disaster. Jobs, income and wealth — and the dignity and pride that goes with them — cannot be replaced by government. Especially an ever-growing and corrupt government. A government that provides burdens and restrictions to business — not incentives.

A government that became obviously corrupt.

Does anyone still belive the Justice Department is not corrupt — or at least blatantly biased? Does anyone still believe that there was not a “smidgen of corruption” (to quote the President of the United States) at the IRS? Despite some progress, any visitor to the local V.A. hospital can tell us — there is still a lot that goes wrong there. And why can’t we privatize it?  And are we better off because of Obamacare? Nope.

We still don’t know the truth about Hillary Clinton’s private email server. Was she hiding illegal activity? Almost certainly. We used to say in journalism, “Follow the money.” The New York Times should have figured this out by now but they are no longer interested in truth — just “the narrative.”

They didn’t want to find criminal activity that might harm their sacred cow. They couldn’t fathom letting go of the narrative once the truth came out.

Well, the narrative just got rejected by the deplorable voters who still have some insight and wisdom and sources of information better than that provided by the “Mainstream Media.”

The “JV Team” can now maybe be called the Islamic State terrorists?

The upper tax rate for American businesses in the U.S. is 30%. In Ireland it is 12%. But President Obama and Hillary Clinton constantly smeared American business leaders who sent jobs overseas as un-patriotic. Guys like Harry Reid kept offering to punish them with more costs — the very reason they left the hostile-to-business government at home.

The facts kept getting on the way of the “narrative.”

Why did President Obama become the president of regulations and executive orders? He blamed the Congress — the elected body established by the Constitution — the Law — to prevent the kind of eight year train wreck America just witnessed. After lying to achieve “his signature legislative accomplishment” he decided to circumvent as much as he could in Congress. They didn’t like the lies, the manipulation of the facts and the tidal wave of debt that kept growing.

He could not face the accountability our system of government imposes. Our system of government demands. No real accountability for the many screw ups at State, Justice, EPA, IRS, V.A. We could go on.

So the voters had to insist on accountability. The options weren’t pretty. Some would say the options were pretty aweful. But the voters decided one was worse than the other.

Hillary failed the accountability test over and over and over. Now she is blaming the FBI and the media for her failures — like an arsonist blaming the match.

We want to yell out at her the way she’s been shrieking at us: “IT’S NOT THEM. IT’S YOU THAT IS THE PROBLEM.”

If you did the crime, you should do the time.

But that didn’t fit the narrative.

President Obama told us he would be insulted if we did not continue his legacy. His government. The no jobs, corrupt government, high-cost Obamacare we did not need government. The wars in Afghanistan, Iraq, Syria, Libya, Yemen government with an uncertain vision of the future. Refugrees and migrants in swarms not seen since World War II. With an uncertain U.S. strategy even today — in almost every part of the world.

The government that refused to enforce immigration laws.

Hey, Mister President, Consider Yourself Insulted.

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American intelligentsia?

As such, the intelligentsia might include artists, school teachers, academics, writers, journalists, and other hommes de lettres (men of letters). Historians debate the political role of the intelligentsia as a progressive influence and as a regressive influence upon the development of modern societies.

https://en.wikipedia.org/wiki/Intelligentsia

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Obama’s Policies and Broader Vision Face Reckoning With History

As he raced across the country before the election, President Obama warned supporters about the stakes. “All the progress we’ve made over these last eight years,” he said, “goes out the window if we don’t win this election.”

Hillary Clinton, his anointed successor, did not win, and so now Mr. Obama will find out whether his prediction was just campaign hyperbole or if his legacy really has just gone out the window. Not only are specific initiatives like his health care and climate change programs at risk, but so, too, is the broader vision Mr. Obama articulated for America.

Source: http://www.nytimes.com/2016/11/13/us/politics/obama-legacy-donald-trump.html